Favorable jobless claims data from the US eased concerns with respect to global economic recovery yesterday. This led to rise in risk appetite which in turn has also supported Asian markets today. Appreciation in the Chinese Yuan in this scenario has also helped boost sentiments on hopes that a rising Yuan will help to accelerate global economic growth on the back of rise in purchasing power in China.
US jobless claims decreased by 7,000 to 395,000 for the week ending 6th August, lowest since April 2011, from the previous figure of 402,000. The country’s trade deficit unexpectedly widened 4.4 percent to $53.1 billion in June as compared to $50.8 billion in the prior month. The deficit reached to its highest level since October 2008 mainly on the back of sharp decline in exports.
The US Dollar Index (DX) reversed gains and depreciated by 0.1 percent on Thursday mainly due to rise in US equities. The DX touched an intra-day low of 74.45 and closed at 74.68 yesterday.
Better-than-expected jobless claims data and improved corporate earnings supported gains in equities trading yesterday. The Dow Jones closed above the 11,000 mark and closed around 420 points higher while the S&P rose by 4.6 percent on Thursday.
The Indian Rupee (INR) depreciated 0.2 percent in yesterday’s trading session mainly on the back of fall in domestic equities due to sharp rise in food inflation. The Nifty and the Sensex declined more than 0.4 percent respectively on Thursday. The currency touched an intra-day low of 45.45 and closed its trading session at the level of 45.35 yesterday. FII outflows stood at Rs 5923.30crores in the month August. On a year to date basis, FII inflows totaled to Rs4777.20crores till 11th August.
India’s food inflation rose sharply to 9.90 percent for the week ended 30th July, as costs of cereals, fruits, egg and fish, rice, vegetables, wheat, potato and onion increased, according to data by the Ministry of Commerce and Industry. Food inflation stood at 8.04 percent in the previous week. The fuel price index rose to 12.19 percent in the same week from the prior level of 12.12 percent.
Outlook
Today we expect the INR to appreciate, taking cues from dollar weakness and upbeat sentiments in the global markets which will provide support to the domestic markets today.
